EDITOR'S CHOICE --SCOTT SUTTELL

Cleveland's default experience could hold a lesson for bankrupt Detroit

Blog Entry: August 21, 2013 10:44 AM | Author: SCOTT SUTTELL

Detroit's bankruptcy filing prompts Fortune to examine what the Motor City can learn from three places — including Cleveland — that “fell before it and survived.”

Pittsburgh, the story notes, offers a model for reinvention of industry.

“After the collapse of the steel industry, Pittsburgh suffered an employment mismatch, where workers who specialized in manufacturing weren't qualified for other jobs,” Fortune says. “Over the years, however, the city shifted into a services economy with growth in the health care and education industries. Eventually, Pittsburghers adapted to jobs in the new sectors.”

Orange County, Calif., which declared bankruptcy in 1994, offers lessons on how to boost incomes — primarily through business-friendly policies to “accommodate the growth of business downtown” — and raise property values by driving down the number of abandoned buildings. (Easier said than done, Fortune.)

Cleveland's lesson: Restore credibility on the political front. (But speaking of credibility, Fortune muffs it a bit by stating at one point in the piece that Cleveland declared “bankruptcy,” which is not accurate.)

From the story:

When looking for short-term help, a change of face can often persuade current and potential creditors with the reassurance they need to extend a lifeline to the beleaguered city. After its 1978 default, Cleveland's change of mayor showed how this could work.

Like Detroit, Cleveland suffered heavy population losses … seeing a 24% population decline during the 1970s. That, coupled with a recession, led the city to default on debt repayments of $15.5 million.

Six local banks held the majority of the debt. Mayor Dennis Kucinich … tried unsuccessfully to refinance the debt. It wasn't until George Voinovich replaced Kucinich as mayor that the banks agreed to refinance $10.5 million in defaulted bonds and lend the city an additional $25.7 million. Cleveland eventually produced a surplus and was able to pay its obligations.

The entry of Voinovich brought some much-needed credibility to Cleveland and was largely the reason the city got the help it did from the private sector.

Fortune concludes that Detroit “can do the same, but its economic recovery will require an acknowledgement that the city must evolve. Reinvention and learning from history are the makings of revival.”

This and that

Any accord would be affected by the outcome of seven product-liability trials between September and January, according to five people familiar with the matter. The first of those trials is scheduled to take place next month in Cleveland.

J&J “seeks to resolve as many as 11,500 lawsuits in the U.S. and has considered paying more than $300,000 per case,” Bloomberg reports. Such a settlement “would exceed $3 billion if most plaintiffs accept the terms, an amount 50 percent larger than that proposed in previous discussions.”

The story notes that J&J's DePuy unit “recalled 93,000 implants in 2010, including 37,000 in the U.S., after more than 12 percent failed within five years. That rate is climbing, along with suits by patients blaming the chromium and cobalt devices for pain, metal debris and replacement surgeries.”

The seven coming trials of lawsuits by “will help lawyers for both sides frame questions over liability and damages,” Bloomberg reports.

The first is scheduled to begin Sept. 9 in federal court in Cleveland. U.S. District Judge David Katz is overseeing that lawsuit by Ann McCracken, 58, a resident of Rochester, N.Y., who needed two replacement surgeries known as revisions after her implant.

Easy riders: Ohioans have it pretty easy when it comes to the cost of operating a motor vehicle.

Bankrate.com reports Ohio is the 10th-least expensive state for vehicle owners, with an average operations cost of $2,810 per year, about 12% less than the national average of $3,201. The report accounts for the costs of gasoline, insurance, repairs, taxes and fees in each state.

The most expensive state for vehicle owners is Georgia ($4,233), while Oregon ($2,203) is the cheapest.

The car “is about as bare bones as cars come these days, with hand-crank windows, no floor mats and one of the smallest engines of any car,” The Times notes. (Air conditioning is optional.)

The Spark is made in South Korea, seats four, has room for groceries — and starts at $12,170. It also is inexpensive to run, getting about 35 miles to the gallon.

Consumers are responding, as in July, “sales of the Spark increased 163 percent over the previous year, its introductory month, to a record 3,847, showing that a stripped-down minicar can succeed in a market crowded with costlier rivals,” The Times says.

The Ohio City resident, William Wortman, in April bought a Spark with manual transmission for his weekly 250-mile commute to a job as a toolmaker. The Spark's 1.2-liter, four-cylinder engine makes it the smallest in the Chevrolet lineup.

“To me, it's an appliance,” Mr. Wortman tells The Times. “It gets me back and forth. All I wanted was a radio.”

Funny business: It seems kind of pointless trying to rank humor, but Movoto Real Estate blogger David Cross gives it a go with this list of America's 50 funniest cities.

This is no subjective ranking. Mr. Cross looked at data in six categories: comedy clubs per capita; comedian hometowns; where comedians live; comedy/improv festivals; cities used as settings in sitcoms; and improv groups per capita.

Cleveland comes in at a more-than-respectable No. 22, just behind St. Louis but better than the two other big Ohio cities, Columbus (No. 28) and Cincinnati (No. 37.)

Atlanta is No. 1 — that seems odd, but Mr. Cross crunched a lot of numbers — followed by Chicago, Los Angeles, Boston and New York.

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